Interesting structure in Securitas

Despite continued macro signals of an economic slowdown, particularly in Europe, and several profit warnings pointing in the same direction, stock markets rose overall in September. At the same time, interest rates moved slightly upwards while credit spreads were relatively stable.

The Swedish economy does not seem to be getting away scot-free, which has caused the already weak Swedish krona to continue to lose against virtually all currencies. The fund rose by 1.6 (1.3) percent in September, making the gain so far this year 19.7 (19.4) percent.

There have been no major changes to the portfolio structure’s asset allocation, and the share of equities remains at about 60 percent. On the equity side, we have reduced our holdings somewhat in Dometic, Epiroc and SKF following price rises. We instead increased our stakes in Skanska and Essity. In addition, Securitas has been included as a new holding in the portfolio. All in all, the changes have contributed to the stock portfolio becoming somewhat more defensive than previously.

New holding Securitas provides security services. The market for traditional security guard services is showing relatively limited growth, while the market for digital services is growing at a rapid rate and with higher profitability. Securitas has in recent years invested in new technical surveillance solutions that have had a negative impact on profitability. As demand for digital surveillance systems increases, the investments are expected to bear fruit and lead to higher profitability.

The structure of the company may also change as, for example, the geographical synergies are not entirely obvious. Its debt is not challenging given the relatively stable profitability, and the dividend yield is almost 4 percent.

On the bond side, we purchased Offentliga Hus, European Energy and ICE Group, which was financed through a sale of parts of the holding in Örsted (Dong). Offentliga Hus has announced that it intends to achieve an Investment Grade rating within 2 years (currently BB-), which is ambitious but could mean good value growth for the bonds.

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